Aftereffect from Lahaina wildfire will create opportunities for some businesses

Dec. 26—When asked how business has been since the Lahaina fire, Carlos Montano, owner of The Sun Spot in Kihei, pointed to his cash register log, which showed $0.00.

KIHEI—When asked how business has been since the Lahaina fire, Carlos Montano, owner of The Sun Spot in Kihei, pointed to his cash register log, which showed $0.00.

"Zero—that's how much I've made today, and it's almost closing time, " said Montano, who opened his shop in April 2022 in the Azeka Shopping Center Makai after Hawaii removed its strict COVID-19 restrictions.

He said his business struggles started when his air conditioner failed and his roof started leaking, and his permit application to add a hairstyling salon to the back room stalled. Kihei is more than 20 miles from Lahaina ; however, it wasn't immune to the tourism plummet after the Aug. 8 wildfires. Since then, Montano said, he and businesses across Maui have faced mounting challenges, including increased competition from displaced Lahaina businesses.

In the immediate aftermath of the wildfires, the number of visitors to Maui fell about 75 %, representing an estimated $13 million daily loss in visitor spending, according to the University of Hawaii Economic Research Organization. While visitor arrivals have improved, they still are below where they were at this time in 2022. A robust anti-tourism sentiment also has emerged from some of West Maui's displaced residents, who haven't found long-term replacement housing and still occupy so many hotel rooms that the visitor industry's recovery is not expected until well into 2025.

Pamela Tumpap, president of the Maui Chamber of Commerce, said much like Maui's tight housing market is a key issue in Maui's economic recovery, similarly, commercial real estate inventory is tightening, too. Tumpap said that trend is creating additional challenges, especially for Maui's microbusinesses.

The Lahaina fire resulted in the closure of some 834 businesses within the disaster area, according to data from the state Department of Business, Economic Development and Tourism. Since many West Maui business owners will not be able to reopen in the near or far-off future in West Maui, real estate experts and business advocates report that some of West Maui's businesses now are eyeing space in other markets like Kihei, Kahului, Paia, Makawao and Wailea-Makena.

With demand increasing for the remaining supply, competition is rising and could lead to greater tenant turnover. The changes will create opportunities in new markets for some businesses and a greater diversity for patrons. Still, if existing tenants were already struggling, they are now closer to the edge, and some already have gone over.

Mary Albitz, owner of Island Art Party in Azeka Shopping Center Mauka, said she was still trying to come back from COVID-19 and grappling with labor shortages when "the fire made it worse."

"My revenues are 50 % to 60 % of what they were last year, " said Albitz, whose five-year lease is ending this month and is not being renewed.

Albitz and Montano, who said that he has turned down a predatory offer from a business that wanted to buy out his lease, suggest government consider a moratorium—at least temporarily—preventing big corporations from taking spots from struggling local businesses. They said they have seen more national businesses opening up in Kihei.

Albitz and Montano also want officials to amplify the message that Maui is open to visitors to counteract lingering traveler confusion after the government-imposed tourism shutdown that immediately followed the fires.

Glenn Harrington, owner of Studio 151 Tattoo & Skate at the Azeka Shopping Center Makai, said he supports such interventions, though they would come too late for him. Harrington filed for bankruptcy Dec. 12, and his lease ends Sunday.

He said the Lahaina fire hit before his business, which opened in March 2020, had come back from the COVID-19-related shutdowns, tourism drop and labor shortage.

"My common area maintenance (CAM ) fees and my rent is $5, 300, and they are saying the comps are higher now, so they want even more for these guys moving in, " he said. "I leveraged everything. I worked the oil rigs and I sold my house. I put all my equity on the line, and I lost it all."

Sam Stankovits, Studio 151 business manager, said additional competition from displaced Lahaina owners has added to the challenges.

Stankovits said, "We are seeing a lot of businesses from Lahaina getting paid out with their insurance money and coming here to open up. They think they are going to kill it, but the economy is just not good, especially for existing businesses."

But other business owners like Kent Untermann are striving to find new opportunities in these changing times. Untermann, along with his wife, Lori Untermann, owns The Art Source Inc., which includes Pictures Plus, CocoNene, Plus Interiors and California Closets Hawaii.

"Our flagship CocoNene store on Front Street was destroyed. It was one of five stores, but it did 50 % of the volume, and $115, 000 of our sales from that one Front Street location went to salaries and wages for the people selling, making and administrating the products and business, " Kent Untermann said. "Because we are a local manufacturer, it had a much more dramatic effect. We either had to aggressively reopen stores or lay off a bunch of people, which we have been able to avoid."

Untermann said the couple opened a new location Oct. 17 in the Waikoloa Kings' Shops, another Dec. 11 at Ma 'alea in the Maui Harbor Shops, and on Friday switched to a larger 3, 500-square-foot location in the International Market Place in Waikiki, which will become the new flagship CocoNene. On Jan. 15 they are slated to open a new CocoNene store in Kihei Kalama Village.

"We have to get creative because the space availability isn't there. Secondarily, (we have to consider ) what the shift in the marketplace is going to be—where will the visitors be shopping and how will that change the demands, " Untermann said. "Specifically to Maalea Harbor, we believe that all boating activity will now go through that harbor. So prior to the fire, we probably wouldn't consider that location, but with all the activity there we felt it made sense. In the two weeks that we've been open, our sales have been really good."

Moreover, he said, "Kihei Kalama Village has a lot of traffic naturally, but it is true that it is because of the fire that we are looking at locations like Kihei that we would not have (before ), and we aggressively signed these deals early on because we believe it will get more challenging."

Brian Wong, chief operating officer for MW Group, which oversees the Azeka Mauka, Azeka Makai and Kihei Kalama Village centers and Kihei Plaza, confirmed that interest in Maui retail spaces is increasing, and said the management company has picked up three new tenants from Lahaina at Kihei Kalama Village and two at Azeka.

He said hopes that the government, especially Maui County, will support Maui's recovery by expediting the permitting process, which he said has been slow enough to stall business growth. Untermann suggests that the county also provide support by assisting with transition signage to note displaced Lahaina businesses that have reopened elsewhere.

Wong added that while demand is up, tenant turnover at the MW Group-managed Maui properties has been "relatively similar to how it's been in the past."

"We've always worked with (tenants ) to help get through some of these challenges because we realize it's not their fault, obviously, that these things are happening, especially during COVID, " he said. "We would work with them in terms of deferring their rents and coming up with payment plans and so forth."

Wong said MW Group also has provided similar assistance to tenants that needed help after the fires, though the amount of the deferrals that the company could offer was smaller than with COVID-19 given that less government assistance has been made available.

Tumpap said many Maui businesses are frustrated that the breadth of COVID-19 relief money and protections has not materialized in the aftermath of the fire. She said this time around, a state-run paycheck protection program could help businesses. She also suggests that government work in tandem with the nonprofit and businesses sectors to explore solutions such as creating more grant programs for businesses to shore up the gaps in support.

Since the Aug. 8 fires, more than $279 million in U.S. Small Business Administration disaster loans has been approved for Maui. FEMA wasn't able to immediately provide the Star-Advertiser with a breakdown of disbursements to affected Maui homeowners, renters or businesses. However, Tumpap expects that the bulk went to homeowners, given that the first $100 million distribution included only $2 million in SBA Economic Impact Disaster Loans.

"People have said, 'We already have EIDL loans, and we can't take on more debt, '" she said. "The boots on the ground keep trying to get them to take these loans. I'm saying, 'Look at it like an insurance policy and apply. You don't have to decide for six months. If you decide to take it, you have 12 months before you have to make a payment.'"

Hawaii residents and businesses have been given a 45-day grace period, until Jan. 25, to apply for SBA disaster loans for property damage caused by wildfires. The deadline to apply for the SBA EIDL program is May 10.

DBEDT's Business Development and Support Division said the Community Based Economic Development program offers small-business loans ranging from $25, 000 to $125, 000 to eligible small businesses that support economic development in their communities.

Montano said he didn't apply for an SBA loan because he is still paying off other loans that he took out to open the business and doesn't have enough collateral. He did, however, apply for a bridge grant from a pool of $12.5 million offered by the DBEDT in conjunction with the County of Maui.

"My lease is up in March. I'm hoping that I can get one of the (bridge grants ) before then, " he said. "That could be the difference for me when I have to renegotiate. I'm barely hanging on."

Debbie Cabebe, CEO of Maui Economic Opportunity, said 1, 187 applications have been received so far for the bridge grant, and approximately 150 grants have been distributed. Awards range from $1, 000 to $20, 000, she said.

"We know that small businesses are suffering in the wake of the wildfires. This is a sector of Maui County businesses that we work with through our Business Development Center, " Cabebe said. "We are hopeful that this program will provide some relief and keep small businesses up and running. They are critical to the community and the recovery."

Cabebe said the Maui County Office of Economic Development is looking for options for businesses that are facing increased challenges due to the fires and the tightening commercial real estate market.